Question 1

An auditor could determine how many items need to be selected from the population for a particular audit test by consulting:

Accepted Answer

ASA 530 specifically deals with the auditor's responsibility to design and perform audit procedures in response to assessed risks, including determining the sample size for a particular audit test. ASA 500 deals with overall objectives for audit engagements, and ASA 300 deals with the auditor's responsibilities to plan and perform an audit.

Question 2

Privately held companies have annual financial statement audits:

Accepted Answer

Privately held companies often have audits to obtain financing from banks, as banks may require audited financial statements to assess the company's financial health and creditworthiness.

Question 3

Which of the following can be significantly affected by an audit?

Accepted Answer

An audit primarily affects information risk by providing assurance on the accuracy and reliability of financial statements, thereby reducing the uncertainty about the information provided.

Question 4

The process of recording, classifying, and summarising economic events in a logical manner for the purpose of providing financial information for decision making is:

Accepted Answer

The process described in the question is known as accounting. Auditing is the process of examining and verifying the accuracy of financial records, finance deals with the management of money and investments, and economics is the study of production, consumption, and distribution of goods and services.

Question 5

One consequence of CPA Australia's Quality Assurance Program is likely to be:

Accepted Answer

The Quality Assurance Program will likely provide information and resources to practitioners to improve their service quality. It may also result in some disciplinary actions, but it is not expected to lead to a reduction in management consulting services or a reluctance to take on higher risk clients.

Question 6

Which one of the following is NOT one of the six objectives of quality control?

Accepted Answer

The six objectives of quality control are (1) Proper planning and execution of audit; (2) Adequate staffing and supervision; (3) Understanding the entity and its environment; (4) Risk assessment procedures; (5)Audit evidence evaluation procedures and (6) Monitoring. Professional development is not one of these objectives.

Question 7

In 'auditing' accounting data, the primary concern is with:

Accepted Answer

The primary concern of auditing is to ensure that the recorded information in the financial statements accurately reflects the economic events that occurred during the accounting period. This includes checking for errors, omissions, misstatements, and fraud. While tax compliance may be a secondary concern, it is not the primary focus of auditing. Additionally, while fraud detection is important, it is not the only concern in auditing.

Question 8

The main purpose of the Corporations Act is to:

Accepted Answer

The main purpose of the Corporations Act is to establish appropriate corporate governance mechanisms to promote appropriate decision making by participants and managerial accountability to shareholders. The Act aims to regulate the conduct of companies, directors, and shareholders to ensure that they act honestly, fairly, and in the best interests of the company and its stakeholders. The Act also provides for the regulation of financial reporting and compliance with accounting standards, but this is not the main purpose of the Act. Additionally, while the Act does require auditors to be registered, this is not its primary purpose. Finally, while the Act does have some interaction with the Australian Securities Exchange's Listing Rules, this is not its main purpose.

Question 9

Which of the following services provides no assurances about the client's financial statements?

Accepted Answer

The answer of Which of the following services provides no...

Question 10

An audit to determine whether the auditee is following specific procedures or rules set down by some higher authority is classified as:

Accepted Answer

A compliance audit focuses on ensuring that the auditee is following specific procedures or rules set down by some higher authority, such as laws, regulations, or policies. A production audit focuses on the manufacturing process, an operational audit focuses on organizational procedures and effectiveness, and an audit of financial statements focuses on the accuracy and fairness of financial reporting.

Question 11

Which one of the following services provides a moderate level of assurance about the client's financial statements?

Accepted Answer

A review provides a moderate level of assurance on the client's financial statements. An audit provides a high level of assurance, while compliance and forecasts/projections do not provide any assurance about the financial statements.

Question 12

Which of the following is NOT a category of Auditing Standards?

Accepted Answer

Ethical requirements are not a category of Auditing Standards; they are separate guidelines that auditors must follow, while the other options are categories within auditing standards.

Question 13

Firms providing audit services can be incorporated provided:

Accepted Answer

The other options listed are incorrect. A firm providing audit services can be a large partnership and there is no requirement for all partners to be listed as directors. The total income of the audit firm is not relevant in determining whether or not the firm can be incorporated. However, obtaining appropriate and adequate professional indemnity insurance is a requirement for incorporating a firm providing audit services.

Question 14

As businesses become more complex and need more reliable information, public accountants play a vital role in:

Accepted Answer

Public accountants offer a range of services including tax services, assurance on various types of information, and business advisory services, making all options correct.

Question 15

Which one of the following was NOT an objective of the Institute's Quality Review Program?

Accepted Answer

The answer of Which one of the following was NOT...

Question 16

Any service in which the public accounting firm issues a written communication expressing a conclusion with respect to the reliability of a written assertion that is the responsibility of another party is:

Accepted Answer

The service described is an attestation service, which includes engagements such as audits, reviews, and compilations, in which the public accounting firm issues a written communication expressing a conclusion about the reliability of information prepared by management or another party. Accounting and bookkeeping, tax services, and management advisory services do not involve expressing a conclusion on the reliability of written assertions prepared by another party.

Question 17

In response to the growing need for assurance resulting from the explosion of business transacted electronically over the Internet, the AICPA created:

Accepted Answer

The AICPA created Webtrust in response to the need for assurance in electronic transactions over the Internet. It provides a framework for businesses to demonstrate their commitment to providing secure and reliable online services to their customers.

Question 18

Assessing that a company's policies effectively ensure the company's compliance with environmental standards and laws is:

Accepted Answer

This task falls under the category of an assurance service, which involves evaluating and providing an opinion on the reliability and credibility of information to stakeholders. The internal auditor deals with assessing the effectiveness of internal controls and risk management, while business performance measurement services involve analyzing various aspects of business operations to improve performance. This task is not part of the financial statement audit process, which focuses on ensuring the accuracy and completeness of financial information presented in the company's financial statements.

Question 19

Which one of the following statements is NOT true about audit reports?

Accepted Answer

Audit reports can vary in format and content based on the type of audit, the organization being audited, and the requirements of local and national auditing standards. Therefore, statement B is not true.

Question 20

Which of the following can be regarded as being solely 'compliance' audits?

Accepted Answer

Compliance audits are focused on determining whether specific rules, regulations, or requirements are being followed. Option C involves checking if bank requirements for loan continuation have been met, which is a compliance activity.

Quiz 1: Demand for Audit and Assurance Services